Understanding emotion from speech requires sensitivity to both lexical and acoustic cues. However, it remains unclear whether large audio language models (LALMs) genuinely process acoustic information or rely primarily on lexical content. We present LISTEN (Lexical vs. Acoustic Speech Test for Emotion in Narratives), a controlled benchmark designed to disentangle lexical reliance from acoustic sensitivity in emotion understanding. Across evaluations of six state-of-the-art LALMs, we observe a consistent lexical dominance. Models predict "neutral" when lexical cues are neutral or absent, show limited gains under cue alignment, and fail to classify distinct emotions under cue conflict. In paralinguistic settings, performance approaches chance. These results indicate that current LALMs largely "transcribe" rather than "listen," relying heavily on lexical semantics while underutilizing acoustic cues. LISTEN offers a principled framework for assessing emotion understanding in multimodal models.